Investing

Escape from Mar-a-Lago, and why water stocks are the next gold

By David Callaway, Callaway Climate Insights

Thousands of years from now, when the waters finally recede, will our descendants look upon the miraculously preserved remains of Mar-a-Lago as we look at Stonehenge today? Do you think they’ll wonder what the people who built it were thinking, or who lived there? Nah, me neither.

But Mark Hulbert’s expert analysis of the insurance industry’s challenges as major parts of the Florida coast become submerged drives home a watery future for President Trump’s, uh, future home. And also in our showcase this week, Scientific American unveils a major discovery on where the stones from Stonehenge actually came from. I won’t ruin the surprise, except to say that my bet on aliens is looking more like a long shot.

These edifices, like so many others well-known today, are destined to be ruins themselves, if many climate predictions prove true. Some sooner than later. But with water rising everywhere, it’s hard to imagine we’ll soon face severe water shortages in many parts of the world, including the southwestern U.S. Investors marveling this week at how gold has performed during the pandemic this summer might take a moment to look to the universe of water stocks for inspiration on the next overlooked commodity.

More on water stocks in my ZEUS column, as well as the latest from Europe, and the renewables opportunity in Latin America.

Enjoy.

ZEUS: Finding sunken treasure in water stocks

. . . . It took a worldwide pandemic to push gold futures above $2,000 an ounce this week, but for gold bugs it’s been a long time coming. My former MarketWatch colleague Thom Calandra (The Calandra Report) once painted his hair yellow when gold hit $300. What will he do for an encore?

Water stocks are starting to develop that overlooked commodity feel as well, especially as scarcity reports in the U.S. Southwest and other parts of the world begin to attract attention. And infrastructure delays tied to Covid-19 pressure utilities. Some of the bigger water companies and ETFs have leaped in price this summer as investors start to see a long-term play.

The Invesco Water Resources ETF (PHO) is up more than 20% since mid-March, as is the First Trust Water ETF (FIW). American Water Works (AWK) shares are up more than 10%, as are shares of Essential Utilities Inc. (WTGR). Shares of Evoqua Water Technologies are up more than 30% . . . .

Read the full ZEUS column

Hurricane risk poses a modeling challenge for insurers, though one thing’s for certain

. . . . Wake news?: President Trump’s Mar-a-Lago resort in Palm Beach faces the same sort of risk from rising sea-levels most of coastal Florida does. Would anyone be bold enough to insure it? Mark Hulbert writes that insurance companies facing bigger, badder hurricanes and flooding might actually help the world fight climate change if sky-high premiums on waterfront properties convince people to move to higher ground.

Because of difficulty with hurricane data, Hulbert argues the potential for water destruction is not accurately priced in yet, if it ever will be. But the private market might lead some insurers to vote with their feet.

To get a sense of the magnitude of this uncertainty, consider hurricane risk — perhaps the biggest of the weather-related disasters that insurance companies currently insure against. According to reinsurance company Swiss Re, total U.S. hurricane losses over the past five calendar years (through 2019) amounted to close to $300 billion, or an average of around $60 billion per year. Over the first five years of the 1980s, in contrast, the comparable total (in 2019 dollars) was less than $25 billion, or about $5 billion per year. . . .

Read the full story

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